The concern about climate change has long since ceased to be a question and has become a well-known problem. It is clear to everyone that, in addition to reducing the use of fossil fuels, we must also find technological solutions that will lessen the impact of climate change. The technological solution must meet the following needs: help reduce temperatures during the summer, absorb dust and particulates, filter and purify polluted air, absorb carbon dioxide and produce more oxygen, help preserve soil, and prevent desertification.
Then we realize that this technological invention already exists – it’s called a tree. Trees have all of these properties and more.
A single tree reduces the temperature in summer by up to four degrees, absorbs 20 kilograms of dust and 80 kilograms of particulates containing toxic metals such as mercury, lithium, and lead each year, purifies 100,000 cubic meters of polluted air, produces 700 kilograms of oxygen, and absorbs 20 tons of carbon dioxide. In addition to helping preserve soil and prevent desertification, a tree also reduces noise, much like the construction of an acoustic wall. And that’s even before mentioning the unique benefits of rainforests.
So if we understand that trees are a key solution to dealing with climate change, why does the world continue to cut down so many of them? How is it that private economic interests are allowed to endanger us all? For many years, I thought the problem of deforestation stemmed from increasing paper consumption, but that is not the case. Only about 10% of deforestation is for the paper industry. Ninety percent of the cleared land is for meat production – expanding soy crops mainly for cattle feed, and growing palm oil trees for the food industry.
A few more worrying figures: today only 31% of the world’s land area is forested, only 18% of the world’s forests are protected from deforestation, and over 4 billion dunams of forest have been lost since 1990. Around 2,400 trees are cut down every minute. By the time you finish reading this sentence, another 30 dunams will have been cleared.
But let’s assume we are not environmentalists – what do all these facts actually mean? What are their economic implications? It’s enough to look at the latest report from the World Economic Forum, the global economic organization that met about two weeks ago for its annual conference, in which global risks to the economy are ranked according to their likelihood and potential impact. For several years now, climate-related risks have been ranked among the most significant. These risks are not only important because of the physical and financial damage they can cause to the economy, but also because of their impact on other risks such as the rising cost of living, threats to social stability, mass migration, credit risks, and others. Over the past year, we have also seen how an event like the war in Ukraine has turned into a food crisis, partly as a result of climate change.
So what can be done? On a personal level, we can reduce our meat consumption or become vegan, but our greatest power lies in our money. The money in our pension funds, in our long- and short-term savings, is what fuels companies – and that means we can join the trend of responsible investing, or ESG investing, which is currently estimated at $45 trillion, about 50% of investments in global capital markets, and is expected to reach $125 trillion by 2030.
Until recently, companies were assessed mainly on financial parameters such as cash reserves or credit exposure. But in responsible investing, or ESG investing, there is an understanding that a company’s resilience depends not only on these traditional measures, but also on its ability to withstand changing global challenges, to operate based on environmental, social, and governance criteria, and to identify new business opportunities through sustainable products and services – those whose demand is growing and whose growth potential is greater.
By shifting to responsible investing, you are joining a growing global movement. Today, it is estimated that $45 trillion in managed assets worldwide already integrate ESG considerations into investment decision-making, and by 2030 that number is expected to reach $125 trillion.
Does it make a difference? It turns out that it does. By carefully choosing the companies we invest in, we can measure the carbon footprint of our portfolio. And even within the ESG world, not all portfolios are the same. When we at Value² compare the carbon footprint of our ESG investment portfolio with international ESG benchmarks such as the S&P 500 ESG, we find that simply shifting investments to our ESG portfolio saves 2,815 trees a year for every $1 million invested – effortlessly, along the way.
Happy Tu BiShvat. 🌳
